WASHINGTON — In a move that could significantly impact the automotive industry, the U.S. government has announced a 25% tariff on all cars not made in the United States, effective next week. The tariff, which also applies to imported car parts, is expected to drive up prices for consumers and potentially lead to a recession in the auto industry.
According to industry experts, the tariffs could result in a price increase of 15-20% for cars assembled outside the U.S. or containing foreign-made parts, translating to an average price hike of $6,000. This could affect over half of the 50 best-selling cars in the U.S., including popular models such as the Toyota RAV4 and Honda CR-V.
The tariffs are likely to have a disproportionate impact on lower-priced vehicles, with many models in the $25,000-$40,000 range at risk of being pulled from the market. General Motors, the largest U.S.-based automaker, faces significant challenges, as many of its models, including the Chevrolet Trax and Trailblazer, are manufactured in other countries and will be subject to the tariffs.
Industry analysts warn that the tariffs could lead to a decline in car sales, as higher prices may deter consumers from purchasing new vehicles. This, in turn, could result in a surge in used car prices, as buyers seek more affordable alternatives. The average transaction price for new cars in the U.S. is already near record highs, with many consumers struggling to keep up with loan payments. In fact, 6.6% of subprime borrowers were at least 60 days past due on their loans as of January 2025, the highest rate ever recorded.
The long-term effects of the tariffs on the automotive industry remain uncertain, but experts agree that the consequences will be far-reaching. As one analyst noted, "The United States loses all the things that Canada and Mexico bring to the table," including natural resources and lower labor costs, which have enabled the U.S. to compete with the EU and China. The tariffs may ultimately lead to a decline in the competitiveness of the U.S. automotive industry, as companies struggle to adapt to the new trade landscape.
